France is shrouded in political turmoil, but is there opportunity in the Euro's crisis? Germany's economy is showing signs of life, holding its bottom line.
2025-10-27 17:38:00
The euro fluctuated against the dollar during the Asia-Europe session on Monday (October 27), remaining nearly flat, currently trading around 1.1632. While the euro's upside potential remained suppressed by a stronger dollar and political instability in France, the German IFO business survey, which showed a slight improvement over expectations, provided a brief boost to the euro.
The euro may fluctuate above 1.1600 against the US dollar in the short term, and the market is paying attention to the direction of the ECB's interest rate meeting and the eurozone economic data.
As a core leading indicator of the eurozone economy, the data covers the business climate judgments of more than 7,000 companies in various fields such as manufacturing and construction. The market expects the overall business climate index to rise slightly from 87.7 in September to 87.8. The actual data slightly exceeded expectations at 88.4.
As expected, the data shows a positive outlook, and the euro is likely to remain range-bound against the dollar. The unexpected breakout above 88 in the business climate index will reinforce market expectations of a stabilizing German economy, providing substantial support for the euro. Combined with ECB board member Escrivá's statement last Sunday that he is satisfied with current interest rates and that inflation is on target, the euro's short-term downside risk may be significantly reduced.
French political turmoil has become a major negative catalyst: Socialist Party leader Olivier Faure has threatened to submit a motion of no confidence, and the key swing votes held by his party may lead to the fall of Le Corny's government. Such political deadlock has led to a 1.5% drop in French corporate investment and has spillover risks to the eurozone economy.
Moody's downgraded France's rating outlook from stable to negative, while Standard & Poor's maintained Belgium's rating outlook at negative. It's worth noting that the market had generally expected the two countries' ratings to be downgraded to A1 and AA-, respectively, but these downgrades were not made, which offset some of the market's concerns about the euro.
The downgrade comes amidst the political backdrop of the French government's struggle to pass its budget.
However, the euro remained weak against the dollar due to growing concerns about political unrest in France. Socialist leader Olivier Faure has threatened a no-confidence motion, with his party holding the crucial swing vote that could bring down Le Corny's government. This political deadlock has already led to a 1.5% drop in French business investment and has spillover risks to the eurozone economy.
The mainstream market expectation is that the European Central Bank (ECB) will maintain the current interest rate level unchanged at its monetary policy meeting on Thursday.
Combined with the signals of slowing labor market growth and CPI inflation data falling short of expectations, the Federal Reserve is expected to initiate an interest rate cut.
Later this week, the eurozone will release preliminary third-quarter GDP data and October core inflation data.
These data will provide key data support for in-depth analysis of the region's economic prospects.
Both policy and data aspects require attention: the market generally expects the European Central Bank to keep interest rates unchanged on Thursday, while the Federal Reserve may start a rate cut cycle due to the slowdown in the labor market. The divergent policy expectations may reshape the exchange rate logic; this week's Eurozone third-quarter GDP and October inflation data will provide key guidance for the ECB's policy path.
As can be seen from the daily chart, the euro/dollar exchange rate has been above the 1.1600 bullish and bearish dividing line for four consecutive days, and is also above the rising trend line. The euro is expected to maintain range fluctuations above 1.1600 in the near future. Bulls can wait for the moving averages to converge and the short-term moving average to turn upward before choosing to attack upward.
(Euro/USD daily chart, source: Yihuitong)
At 17:35 Beijing time, the euro was trading at 1.1633/34 against the US dollar.
The euro may fluctuate above 1.1600 against the US dollar in the short term, and the market is paying attention to the direction of the ECB's interest rate meeting and the eurozone economic data.
German IFO data boosts euro
As a core leading indicator of the eurozone economy, the data covers the business climate judgments of more than 7,000 companies in various fields such as manufacturing and construction. The market expects the overall business climate index to rise slightly from 87.7 in September to 87.8. The actual data slightly exceeded expectations at 88.4.
As expected, the data shows a positive outlook, and the euro is likely to remain range-bound against the dollar. The unexpected breakout above 88 in the business climate index will reinforce market expectations of a stabilizing German economy, providing substantial support for the euro. Combined with ECB board member Escrivá's statement last Sunday that he is satisfied with current interest rates and that inflation is on target, the euro's short-term downside risk may be significantly reduced.
Impact of French political turmoil on euro slows
French political turmoil has become a major negative catalyst: Socialist Party leader Olivier Faure has threatened to submit a motion of no confidence, and the key swing votes held by his party may lead to the fall of Le Corny's government. Such political deadlock has led to a 1.5% drop in French corporate investment and has spillover risks to the eurozone economy.
Moody's downgraded France's rating outlook from stable to negative, while Standard & Poor's maintained Belgium's rating outlook at negative. It's worth noting that the market had generally expected the two countries' ratings to be downgraded to A1 and AA-, respectively, but these downgrades were not made, which offset some of the market's concerns about the euro.
The downgrade comes amidst the political backdrop of the French government's struggle to pass its budget.
However, the euro remained weak against the dollar due to growing concerns about political unrest in France. Socialist leader Olivier Faure has threatened a no-confidence motion, with his party holding the crucial swing vote that could bring down Le Corny's government. This political deadlock has already led to a 1.5% drop in French business investment and has spillover risks to the eurozone economy.
Key Outlook on Policy and Data
The mainstream market expectation is that the European Central Bank (ECB) will maintain the current interest rate level unchanged at its monetary policy meeting on Thursday.
Combined with the signals of slowing labor market growth and CPI inflation data falling short of expectations, the Federal Reserve is expected to initiate an interest rate cut.
Later this week, the eurozone will release preliminary third-quarter GDP data and October core inflation data.
These data will provide key data support for in-depth analysis of the region's economic prospects.
Both policy and data aspects require attention: the market generally expects the European Central Bank to keep interest rates unchanged on Thursday, while the Federal Reserve may start a rate cut cycle due to the slowdown in the labor market. The divergent policy expectations may reshape the exchange rate logic; this week's Eurozone third-quarter GDP and October inflation data will provide key guidance for the ECB's policy path.
Technical Analysis:
As can be seen from the daily chart, the euro/dollar exchange rate has been above the 1.1600 bullish and bearish dividing line for four consecutive days, and is also above the rising trend line. The euro is expected to maintain range fluctuations above 1.1600 in the near future. Bulls can wait for the moving averages to converge and the short-term moving average to turn upward before choosing to attack upward.
(Euro/USD daily chart, source: Yihuitong)
At 17:35 Beijing time, the euro was trading at 1.1633/34 against the US dollar.
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